Peter Thiel’s Startup - Class 2 Notes Essay

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I. Late to the Party

History is driven by each generation’s experience. We are all born into a particular culture at a particular time. That culture is like an extended dinner conversation; lots of people are talking, some lightly, some angrily, some loudly, some in whispers. As soon as you’re able, you listen in. You try to figure out what that conversation is about. Why are people happy? Why are they upset? Sometimes it’s hard to figure out.

Take someone born in the late 1960s, for instance. There was a lot going on then, culturally. But a toddler in the late ‘60s, despite having technically lived through them, essentially missed the debates on civil rights, Vietnam, and what the U.S. was supposed to look like. The child, being more or less excluded from the dinner table, would later find it hard to get a sense of what those discussions were like.

There is a keen analogue between the cultural intensity of the ‘60s and the technological intensity of the 1990s. But today’s college and perhaps even graduate students, like the toddler in 1969, may have been too young to have viscerally experienced what was going on back in 1999. To participate in the dinner table conversation — to be able to think and talk about businesses and startups today in 2012 — we must get a handle on the history of the ‘90s. It is questionable whether one can really understand startups without, say, knowing about Webvan or recognizing the Pets.com mascot.

History is a strange thing in that it often turns out to be quite different than what people who lived through it thought it was. Even technology entrepreneurs of the ‘90s might have trouble piecing together that decade’s events. And even if we look back at what actually happened, it’s not easy to know why things happened as they did. All that’s clear is that the ‘90s powerfully shaped the current landscape. So it’s important to get as good a grasp on them as possible.

II. A Quick History of the 90s

Most of the 1990s was not the dot com bubble. Really, what might be called the mania started in September 1998 and lasted just 18 months. The rest of the decade was a messier, somewhat chaotic picture.

The 1990s could be said to have started in November of ’89. The Berlin Wall came down. 2 months of pretty big euphoria followed. But it didn’t last long. By early 1990, the U.S. found itself in a recession — the first one in post WWII history that was long and drawn out. Though it wasn’t a terribly deep recession — it technically ended in March of ’91 — recovery was relatively slow. Manufacturing never fully rebounded. And even the shift to the service economy was protracted.

So from 1992 through the end of 1994, it still felt like the U.S. was mired in recession. Culturally, Nirvana, grunge, and heroin reflected increasingly acute senses of hopelessness and lack of faith in progress. Worry about NAFTA and U.S. competitiveness vis-à-vis China and Mexico became near ubiquitous. The strong pessimistic undercurrent fueled Ross Perot’s relatively successful third party presidential candidacy. George H.W. Bush became the only 1-term President in the last thirty years. Things didn’t seem to be going right at all.

To be sure, technological development was going on in Silicon Valley. But it wasn’t that prominent. Unlike today, the Stanford campus in the late 1980s felt quite disconnected with whatever tech was happening in the valley.